Seasoning Issues And Using A Landtrust
How many of you use land trusts when doing shorts. im not sure about the whole double closing scenerio where the buyers lender might want a chain of title and wont lend money on the property because i dont own it or have only owned it for a short amount of time. so will they be less sceptical about lending on a propertie thats in a trust or what?
also im confused about keeping the title in escrow, if heard people say that you have to be deeded title before the packets acceptance for it to be legal. but what do you do when you have title and the packets not accepted or your buyers lender wont loan, deed it back to the seller or what? any help would be great thanks Jeb.
Hey JEB!
You asked: Quote: How many of you use land trusts when doing shorts.
I do.
[Quote] im not sure about the whole double closing scenerio where the buyers lender might want a chain of title and wont lend money on the property because i dont own it or have only owned it for a short amount of time. so will they be less sceptical about lending on a propertie thats in a trust or what?
YES if you KEEP the original Owners as the ONLY NAMED Beneficiaries of the Trust + get a Silent Assinment of Bene. Int. and POA to handle the Closing/retail re-sell to the End-Buyer
Quote:also im confused about keeping the title in escrow, if heard people say that you have to be deeded title before the packets acceptance for it to be legal.
Not for sure which Short-Sale or Land trust REI program you are working with but the entire process should be COMPLETELY spelled out in it
Quote:but what do you do when you have title and the packets not accepted or your buyers lender wont loan, deed it back to the seller or what?
Name the Seller as the Sole-Beneficiary of the Trust and get some CYA document back to the Short-Lender that certifies that the Owner WON'T obtain ANY PROCEEDS/PROFITS from the re-sell....Only problem then may be that the Banks may Wnat 100% after seeing what the Retail end-buyer is willing to pay on the HUD-1
Quote:any help would be great thanks Jeb.
BTW JEB - Does your buyer's loan broker have the ability to pull the loan to another lender whom DOESN'T Require title-Seasoning???
I hope this helps...
Derrick Ali :-D
Hi DerrickAli, thanks for the reply. im actually working with an investor who has done a few shortsales in florida and is willing to help me and my partner, we have a property were a murder took place outside and it involved the sellers husband and kids she is behind in payments and they were just renovating it so we figure its an ideal shortsale candidate.
basically i just wanted to clear up a few questions i had, thats all.
so if i put the property into a trust and leave the seller with ben. rights and im the trustee. then i wouldnt transfer ben. rights untill the bank excepted the shortsale correct? or would i transfer ben. rights nomatter what and just rip it up if the short wasnt excepted since im not recording the transfer? also what other exit strategies do i have if i cant find a buyer in 30-60 days besides ripping up the beneficial rights transfer and letting the seller be foreclosed on. what will the bank do if i dont come up with a buyer in 30 days and cash them out?
Also if i cant sell the property then wont i be left as trustee of a property thats going to be foreclosed on, and will have to deal with the banks on issues about the propertie since im now trustee of a propetie that couldnt sell.
im not looking for excuses i just want to know all my options and exit strategies. thanks again, any help would be great. Jeb.
[ Edited by ZinOrganization on Date 08/20/2004 ][ Edited by ZinOrganization on Date 08/20/2004 ]
does anybody know this?
JEB:
Sorry about the delay...out closing deals
Are you trying ti Flip it???
Why not take it over Subj-2 and Mkt the Property as follows:
"Seller Financing"
123 MAIN ST. Newly Decorated
NO BANK Qualifying
NO CREDIT Checks
$XXXXX + Closing Costs Moves You in!
Jeb 555-555-5555
you should become a co-Beneficiary with POA to direct the Property Sale + Negotiate with Bank
Hold 90% of the Bene. Interest and leave 10% for the owner to hold
the owners Will FORFEIT their 10% at termination of the Trust for the agreed to payoff amount you guys negotiate upfront to give you Bene. int. in the Trust.
FINDING a BUYER---
If Short Selling I usually act a Trustee but in taking over the existing Mortgage you'd want to REPLACE YOURSELF as Trustee and use a 3rd Party corp. trustee so as to free yourself from the WEB of Obligations the Trustee usually has to take on.
By both Marketing the home via Seller-financing While you are Seeking a Short-sale solution with the lender gives you DOUBLE-COVERAGE to quickly sell the home.
Once you've found the Tenant-Buyer :
(and I am sure you'll have no problem locating a 'qualified' tenant-buyer)
Grant them 50% of your 90% bene. int. held in the Trust (which now owns Title to the property)
the TB's upfront payment is a BUY-IN payment to own a co-beneficiary interest in the Trust and will be credited towards their Purchase price of the home 2, 3, or 5 years down the road....
By setting up the Trust properly You may IMMEDIATELY +Legally sell or SPLIT(share with) to the TB:
- Use & Occupancy
- Tax Benefits
- Equity Build Up
- Appreciation (if any)
Make sense yet???
Hope this Helps!
Derrick Ali :-D
thanks again DerrickAli for replying.
Yes this deal is going to be a flip, basically we want to put the house into a trust and find a cash buyer in the 30-60 days i have to sell it.
my second option is to find a private money lender, i currently dont know any and have been told that they usually will loan on a property as long as there is a 70% L.T.V. whats your take on that?
my third option was going to be to take it over sub2. me and my partner are really trying to get some fast cash to pay for some start up costs and finance other deals so this would be my last option.
I was just trying to clear up some stuff on Land Trusts and Seasoning thats all, you kinda confused me even more but thats ok at least you were willing to help. is there any articles or posts you remember about using trusts when doing short sales or even seasoning issues that might come about when doing shorts that you might be able to direct me to. Thanks again Jeb.
Great stuff, Derrick!
Where did you learn those ideas? Whick courses?
Also: I am missing s.th.: How can you offer owner financing? Doesn't the bank taking the SS want to be paid off in full??
Thanks,
Falk
Falk:
Nice to meet you1
You asked---Quote:Where did you learn those ideas?
Landtrust.net BILL GATTEN
Quote:Whick courses?
His Success Pack
Quote:Also: I am missing s.th.: How can you offer owner financing? Doesn't the bank taking the SS want to be paid off in full??
Yes the bank getting a short sale needs all Cash I was referring to What I do with Deal not necessarily with shorts...
When I Do SHORTS I... Make an Agreement with the Owner/sellers to faciltate my paying off the discounted loan via a Simple Living Trust they establish. Then I have them to sign an affidavit of no participation in the proceeds obtain from their lender's discounting their mortgage loan. Step 3 is to line up my End-Buyer (whom purchases from the trust and at closing)
At this point the Trust terminates and the Original owner/sellers forfeit their remaining beneficial interest held (once their lender is cashed out completely)
And then I, as the sole-remaining Beneficiary, direct the Trustee to grant warranty deed to the End-Buyer
Derrick,
). Their att. didn't like taking over an entity or a trust, so we did a double closing (1.4% transfer taxes in NY...). Since all cash buyer, there was no issue about seasoning. And bank got a closing statement.
ramble, ramble.
thanks for taking the time to reply, and nice to meet you, too.
Two questions remain for me:
How do you explain to the bank that the owner puts their house in a trust?
(Also, here in NY, if I go record a deed today, it will be 'lost' in the city's records for 2 months, and only then be in the system. Meaning, if I wanted to transfer title w/in those 2 months again: I would have a big problem/could not do it - so I don't record the deeds I get).
How do you make your $ w/o the bank (and the homeowner, for that matter) seeing it?
They wanna see a HUD or a closing statement, right?
I closed on my first SS a couple of weeks ago. Had used a trust as the BUYER on the contract. Had then tried to assign the trust to my (all cash) buyers for a fee (85k that was...
Will soon close my first SS deal to a buyer who gets a loan. She says the no-seasoning is ok with her lender.
So you have the original homeowner deed it into trust (for estate planning, if anybody cares to ask, I assume...), then have the trust sell it to your buyer. I get it. But how do you manage the bank not seeing the purchase price?
Does HO see how much you make?
How do you account for the profit? Are you on title? (Yes, you were the beneficiary.)
You explain to your buyer's lender that the transfer into trust recently was just for estate planning, hence no seasoning issue?
Sorry, that was more than 2 questions...
I owe you a milkshake if you answer all of them! (Call me on it, when you come to NY!)
Thanks in advance,
Falk
Also: I position myself as somebody who assists the owner, not as the buyer.
The buyer is that Johnson Family Trust, M.Y. Buddy as Trustee.
So, if s.th. goes funny/doesn't close on time, etc. it's the bad, bad trust, not me...
Who are you when you talk to the bank?
im not sure about this, but i heard that when you do a short sale, the difference of equity that you create by doing the short sale when you sell ifs taxable, but it is taxable to the seller. is this true? and if so, how do you solve that problem?[ Edited by I_Need_Help on Date 08/22/2004 ]
Derrick, or someone else: Care to fill us in on the answers?
I bet this would be beneficial to many short sale forum readers...
Thanks in advance,
Falk
Also: To 'I need help':
Yes, the homeowner could be 1099-ed from the lender for the hit the bank takes in the SS, but most likely won't...
(And, I am assuming - NOT knowing: The same chance exists if the house went to auction, the bank takes it back, and later sells it for less as an REO - RIGHT??? Could 1099 prev. owner then as well, right?).
That's why the SS has the following advantages over letting it go to sale:
- credit looks less bad
- still possibly get some $ out of it
- the same risk for a deficiency judgment exists in both scenarios (unless: you neg. w/ bank, that they accept the SS as a FULL sat. of debt)
Correct me if I am wrong.
Falk
Falk:
I'll get back to you soon with the steps.
I',m under the gun closing a scenario just like this one in, tommorow in Brooklyn NY
Alright, what's cooking with our Trust/Seasoning topic here??? :-o
Must be an issue/educational for most short sellers.....
Falk
If the seller is Peggy Smith, I get her to set up the "Peggy Smith Family Land Trust". My LLC is trustee, Peggy Smith is beneficial interest. Then on a seperate assignment of benefical intereset, Peggy Smith signs over her beneficial interest to me. (you can use anyone or any entity within your control for the trustee or beneficial interest).
When you do the double close, the retail buyer's mortgage company might ask for the land trust documents. They will not know about the assignment of benefical interest. So they see that Peggy Smith set up the land trust for estate planning purposes and it appears that she is still the benefical interest. So there is no break in the chain of title.
What is important for the double close is the closing attorney. He must work with you to have Peggy Smith and you as the buyer on the HUD1 sent to the short sell lender. Really the first close is a fake close. You already have the deed in the land trust. You are just signing the papers for the lender. And the attorney must be willing to use the retail buyer's lender's money to fund the first close.
Brenda
so im a little confused about the transfer of funds at closing. so my LLC is the trustee of the john smith land trust, with the unrecorded beneficial rights. so the buyers bank sees that the previous owner/seller still has beneficial rights when they do a title search or look at the trust docs. so my question is who do i present with the unrecorded beneficial rights document to get my money at closing? and what will the buyers attorney think when he sees that im really the owner or will i transfer title as trustee of the John Smith trust, so it wont matter.[ Edited by ZinOrganization on Date 08/27/2004 ]
I've heard of some say that they avoid having the seller create the land trust and assign the beneficial interest. Rather, they simply have the seller deed the property in a land trust you set up. Any thoughts on advantages or disadvantages of this method?
My understanding:
Either way: YOU set up the trust.
Only difference:
You/your corp. being the beneficiary right away
OR: making the HO the (initial) beneficiary, and then immediately have that assigned to you/your corp.
Since the beneficiary is NOT on public record... -> you could choose who you show as beneficiary... (Can you say 'No Seasoning Issue!!')
Falk
Zin: Trustee (your buddy...) signs all the closing doc's...
And if title co./lender wants to see who the beneficiary is: see above.
Falk